2020 (4) TMI 448 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of dues - existence of dispute or not - HELD THAT - There is pre-existing dispute over claim made in the instant Petition, and the Petitioner failed to explain laches and limitation, and it is initiated with an intention to recover the balance amount of 10 % which is stated to have forfeited, which is contrary to settled position of law. It is also placed on record that Respondent is a solvent company and having around 2000 employees on regular and seasonal on its roll. Therefore, the Company cannot be put under CIRP, when the Petitioner failed to make out case in favour of such prayer. Since the Respondent, for the first time stated to have raised plea of forfeiture of remaining balance amount in its reply dated 08th March, 2019, it would be just and proper to direct the Respondent to reconsider the claim of Petitioner, dispassionately, in terms of Purchase order and Agreement in question, in order to avoid further litigation, without prejudice to the rights of both the Parties. The Petitioner is permitted to submit their representation about its claim along with supported documents to the Respondent within the period of 4 (four) weeks from the date of receipt of copy of this order - Petition disposed off.

Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP)
2. Alleged default and outstanding payment
3. Contractual obligations and performance
4. Pre-existing dispute and limitation period
5. Solvency of the Respondent Company

Issue-wise Detailed Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
The Petitioner, M/s. SSP Private Limited, filed a petition under Section 9 of the Insolvency and Bankruptcy Code (IBC), 2016, seeking to initiate CIRP against M/s. Athani Sugars Limited for an alleged default amounting to ?66,11,862/- along with interest. The petition was filed in accordance with the relevant provisions and rules of the IBC, 2016.

2. Alleged Default and Outstanding Payment:
The Petitioner claimed that it had successfully completed its contractual obligations, including the supply, installation, and commissioning of the plant, and had issued various invoices which were accepted by the Respondent. The Respondent made part payments but failed to pay the outstanding amount. The last part payment was received on 12-12-2014. The Petitioner issued a demand notice on 20-2-2019, which the Respondent replied to on 8-3-2019, alleging false claims and raising the issue of a performance bank guarantee.

3. Contractual Obligations and Performance:
The Respondent contended that it had paid 90% of the purchase order value and the remaining 10% was withheld due to the Petitioner's failure to provide a performance bank guarantee and to meet the operating parameters. The Respondent alleged that the "Spent Wash Evaporation System" failed to work as committed, resulting in losses. The Petitioner denied these allegations but failed to provide sufficient evidence of fulfilling its obligations. The Respondent had to procure additional equipment from another supplier due to the Petitioner's non-performance.

4. Pre-existing Dispute and Limitation Period:
The Respondent argued that the claim was barred by laches and limitation, as the default occurred on 19-1-2015 and the petition was filed on 10-5-2019, beyond the three-year limitation period under Article 137 of the Limitation Act. The Petitioner did not invoke any alternative dispute resolution mechanisms or file any case until the statutory demand notice was issued in 2019. The Tribunal found that there was a pre-existing dispute and the Petitioner failed to explain the delay in filing the petition.

5. Solvency of the Respondent Company:
The Respondent asserted that it was a solvent company with around 2000 employees and was not insolvent. The Tribunal noted that the Respondent could not be put under CIRP when the Petitioner failed to make a case for such a prayer. The Tribunal directed the Respondent to reconsider the Petitioner's claim dispassionately in terms of the purchase order and agreement to avoid further litigation.

Conclusion:
The Tribunal disposed of the petition with the following directions:
1. The Petitioner is permitted to submit its representation about its claim along with supporting documents to the Respondent within four weeks.
2. The Respondent is directed to examine the claim in terms of the purchase order and agreements and resolve the issue by passing an appropriate order within four weeks thereafter.
3. The Petitioner is at liberty to take appropriate legal action if its claim is rejected by the Respondent.

This comprehensive analysis addresses all relevant issues, preserving the legal terminology and significant phrases from the original judgment.

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